Having borrowed enough to cover its $121 million bond bill next month, Versace can afford to be a little choosier now, so the courtship could be a long one. But WWD learned Wednesday that the Istithmar fund, a Dubai, United Arab Emirates-based investor group that is sitting on a cash pile of $2 billion, has contacted the house about taking a minority stake.

Speculation about the next move for Versace continues to heat up as Allegra Beck nears her 18th birthday next Wednesday and receives full control of her 50 percent stake in the company. Meanwhile, the Versace-appointed banks Lazard and Credit Suisse First Boston remain on the hunt for companies interested in taking a minority shareholding in Versace.

“A brand like Versace is the dream of any sheik,” said Matteo Corsini, the Italian partner of Istithmar.

The fund, which could not be reached in Dubai, is the latest private equity name linked to Versace. Once the Italian house admitted earlier this year that it was looking for a financial partner, speculation centered on names like CVC Partners, Cerebus and Apax Partners. None of these has confirmed any interest in investing in Versace.

Meanwhile, Istithmar’s pitch is a particularly unique one: It wants to grow the Versace name both on fashion and lifestyle terms within the flash-hungry and super-style-conscious world of the United Arab Emirates.

“I think Versace is the best brand in Italy,” Corsini said, adding the house’s over-the-top sexiness and bold designs go over well in Dubai, a sort of Miami-meets-Geneva kind of city. “New money is a good combination with the Versace brand,” he said.

Many designer brands and retailers already are aware of the market’s potential. Saks Fifth Avenue has licensed stores in Riyadh, Saudi Arabia, which opened, and Dubai, which was due to open this May, and the Villa Moda chain of designer stores — which has locations in Kuwait and Dubai — is due to open its third unit, in Qatar, after last week selling a minority stake to a group of Middle Eastern investors who plan to pump at least $200 million into the retailer over the next few years. Meanwhile, Giorgio Armani has made his own ties in the Middle East, linking up with Emaar Properties to open a chain of 14 luxury hotels around the world, the first of which is slated to open in Dubai come 2006 or 2007.

Corsini said Istithmar wants to emulate such ambitions with Versace.

There have been Italian press reports expressing skepticism over Corsini’s ability to carry out acquisitions after he has publicly expressed interest in a string of Italian companies. But Corsini said Wednesday he submitted a letter of interest on behalf of Istithmar to Versace’s bankers a month ago, and a few weeks ago Santo Versace contacted him to say that Versace will be sending out financial information to Istithmar and other prospective investors shortly.

Versace declined to comment on specific suitors. “The company has received great interest from many parties. All inquiries have been forwarded to our advisers Credit Suisse First Boston and Lazard,” a spokesman for the house said.

Unlike many U.S.-based private equity groups or European upstarts like Bulgari-led Opera, Istithmar said it’s more than happy with a minority stake in a company. Corsini said Istithmar would ideally like to buy 35 to 40 percent of Versace with a contractual stipulation that the fashion house would fall under the fund’s managerial control if certain financial targets were not met.

Obviously it’s still not clear how big a chunk the Versace family is willing to give up. As reported, the balance of power shifts at the house when Allegra Beck, the late Gianni Versace’s niece, inherits full control of her 50 percent stake. Her mother, Donatella, owns 20 percent while her uncle Santo owns 30 percent. In March, Santo Versace told Italian daily Corriere della Sera that the family was willing to sell as much as 25 percent of the company, but since then there’s been speculation the Versaces might sell more.

Valuations for Versace are difficult as there are few recent financial figures available, but Andrea Paladini, an analyst with Milan’s Centrosim, said that, based on 2002 figures and 2003 forecasts, a range of 200 million euros to 250 million euros, or $242.1 million to $302.6 million at current exchange rates, could be a reasonable starting point.

Versace’s 2003 results, which were originally scheduled for release in April, are expected to come to light July 5 when shareholders meet to approve the books. Earlier this year, Versace released preliminary figures showing a 17.2 percent slide in 2003 sales to 400 million euros, or $484.1 million. Unconfirmed Italian newspaper reports have the company widening its net loss to 40 million euros, or $48.4 million, from 5.8 million euros, or $7 million, in fiscal 2002.

Still, one source close to Santo Versace said he doesn’t think the company is aggressively seeking an investor since Versace has managed to take care of its pressing problem — 100 million euros, or $121 million, worth of bonds due next month. In March, Versace reached a deal with Banca Intesa, which will lend the fashion house 140 million euros, or $169.4 million, which more than covers the bonds.

Corsini spoke highly of Gianni Versace’s fashion genius and praised Donatella and Santo for providing continuity for the family business. Still, he said the brand could use help on the design front to work with Donatella and evolve. “We’re thinking of a personality like [former Gucci creative director] Tom Ford,” Corsini said. When asked whether he thought Donatella would accommodate such an arrangement, he responded: “I think that Donatella, when faced with the prospect of linking up with a potential partner would be happy to accommodate,” he said.

It has been widely reported that Ford and former Gucci chief executive Domenico De Sole took a quick look at Versace, but it was a meeting that went nowhere.

Corsini said he could not discuss the fund’s investments outside of Italy because he is a local partner. Istithmar’s Web site said that its investments include a financial services joint venture with Dubai Islamic Bank, yacht maker Palm Marine and a joint venture with Kerzner International Limited to build a multi-billion dollar resort and residential complex in Dubai as part of a land reclamation project. It also said it has formed RetailCorp, a retail-marketing company that focuses on the Gulf region and has plans to develop sporting goods stores with France’s GoSport chain.

Corsini said Istithmar is eyeing other Italian brands, including financially crippled flagship airline Alitalia, furniture company Natuzzi and high-end jewelry companies. Even though the fund has yet to make a single investment here, Corsini is already mapping out potential synergies between the brands, envisioning Versace fabric-upholstered airplane seats.

“We want to make Alitalia a Ferrari,” he said.

Still, banking a major part of a brand’s development in an area like the Middle East does have its risks, Paladini said.

“It’s an area that is susceptible to eventual geopolitical problems,” he said.

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